The third quarter of 2016 has seen a marked decrease in the number of construction companies in financial distress.

The latest Begbies Traynor Red Flag Alert report, which monitors the financial health of UK companies, says that the number of UK construction companies experiencing 'significant' distress in the July to September period fell by 11% to 28,917 (Q2 2016: 32,311 companies).

The findings are in line with the latest PMI (Purchasing Managers’ Index), which was 52.3 in September, up from 49.2 in August, indicating that the sector has returned to growth.

Begbies Traynor Partner Julie Palmer said: "Our data shows that UK construction firms appear to be bouncing back after the initial Brexit shock, when in July construction activity initially shrank at its fastest pace since 2009. The good news for this sector is that these businesses can also expect a further boost following recent policy announcements including the £3 billion Home Builders Fund, plans to accelerate construction on public land and the unlocking of brownfield sites across the country.

"All eyes now turn to the upcoming autumn statement where further announcements are expected in support of SME developers and increased infrastructure spending. If implemented, these measures should put UK construction firms in an even better position to survive any potential fallout from the Brexit negotiations."

Executive chairman Ric Traynor said: "Overall, the UK economy appears to be in a stronger position than expected following the EU referendum result. While we wait to see whether the government opts for a 'hard' or 'soft' Brexit strategy, businesses at least appear to be better placed to tackle any new challenges on the horizon ahead of the government's imminent negotiations.

"However, given that the details of the future Brexit deal are as yet unknown, it is still too early to tell what longer term impact the 'Leave' decision might have on the UK economy. Clearly though, the stronger the UK economy becomes pre-Brexit, the better it will be able to withstand any post-Brexit shocks."